|CBI stark advice: "Doors to manual" Photo: Rex Features|
CBI and its chief economic adviser Ian McCafferty, is so out of touch says Media Expert Julian Bray. The CBI says the coalition government must ‘support a healthy private sector recovery’ but in order to do this the Treasury needs to claw back sufficent revenues to offer support or borrow substantial sums to keep CBI members in the cossetted way they have enjoyed over the last 13 years.
"It really is a bit rich for someone like the CBI to have a grandly titled 'Chief Economic Advisor' who is ignoring all the current economic indicators to suggest Government increases spending as if Gordon Brown had been returned to power with a mandate to plunder all remaining Government funds. The simple truth is that CBI members have become bloated and uncompetitive whilst foreign firms, China in particular has creamed off all the major manufacturing jobs and delivering quality products at a fraction of the price, duty paid and delivered to the UK. Until the CBI recognises that its own house has to be put in order first they should not be putting a series of spurious road blocks in the way of the Coalition Governments spending reduction plans," Julian Bray added.
The background is Britain's leading employers' organisation has urged George Osborne to cut universal welfare benefits and consider ending final salary pensions for public sector workers to shield big infrastructure projects from planned austerity measures.
Voicing its concern over the impact of the government's spending cuts on growth, the CBI said the Coalition Treasury should make a priority of capital spending, R&D and skills. It said it was vital for the long-term health of the economy that work continued on London's Crossrail projects and the Underground upgrades and put pressure on Osborne to think again about the slowdown in infrastructure spending.
The chancellor's mix of tax increases and spending cuts envisages capital spending growing by just over 1% in the coming years (it grew at over 2% under Labour), but Ian McCafferty, CBI chief economic adviser, said: "Given the very high returns that new infrastructure offers, the planned cuts to net public sector investment are a concern. Public sector capital investment should be returned to 2.25% of GDP as soon as possible. We also need to invest in building up our knowledge and skills base as this will help boost our competitiveness."
The CBI said it backed the need for action to reduce Britain's budget deficit, which rose to a peacetime record of more than 11% of national output last year as the economy contracted by 5%. But it insisted the government should make cuts in universal welfare budgets rather than in infrastructure, knowledge and human capital. Official economic data in recent weeks has pointed to a slowdown in the pace of recovery, with activity in the housing market weakening, a drop in high street spending and the first rise in claimant count unemployment since the turn of the year.
City analysts believe the planned spending cuts are having a dampening impact on consumer and business confidence, with knock-on effects on spending in the shops and on investment plans.
John Cridland, CBI deputy director-general, said: "The government rightly decided to limit public spending. The alternative would have been tax rises and other consequences that would have damaged the economy for years to come. Cutting spending means tough choices. We think that the need for economic growth, not the noise of the loudest voice, should determine where cuts are made."
The CBI said Osborne's spending review on 20 October should have two priorities for the public sector – increasing competition and reducing unfunded liabilities such as pensions.
It said there could be savings in the transport budget from reducing spending on concessionary fares, attracting more private sector investment and welfare reform to get more people back into work, including increasing the use of means-testing for some universal benefits.
"The government must improve the efficiency of public services and focus the limited public money available on areas that do most to galvanise growth," Cridland said.Some CBI members, particularly those working in the construction sector, have already felt the impact of the decision by Michael Gove, the education secretary, to scale back the Building Schools for the Future Programme.
McCafferty said: "Cuts will necessarily affect GDP growth in the short term, but smart choices will give the economy the ability to grow. The government must use its limited resources to support a healthy private sector recovery so it can pick up the slack from the public sector."
A Treasury source welcomed the CBI's comments, which it said "shows that businesses on the front line of the economic recovery support the government's action to deal decisively with the unprecedented budget deficit".
Additional Reporting 'The Guardian'
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